Providing Assurance on Sub-contracting for the Skills Funding Agency
From 2015/16, the Skills Funding Agency (“SFA”) has introduced a new clause to all of its funding contracts. This clause means that providers which sub-contract £100,000 or more of their provision will have to obtain an annual report from an external auditor providing assurance on sub-contracting arrangements. The SFA has also strengthened its sub-contracting funding rules.
In September 2015, the SFA produced guidance on this requirement to obtain external assurance. This guidance sets out who can provide the assurance as well as the scope of the work required. The guidance refers to the SFA’s funding rules and contractual requirements as well as those set out in the FE and SFC Financial Memorandums.
The first annual report must be prepared by 31 January 2016 so time is limited for providers to engage an external auditor to undertake the work.
Sub-contracting arrangements have come under scrutiny by the SFA and the new assurance requirements are a direct response to concerns raised by them. The SFA, by looking for assurance over sub-contracting arrangements, will be able to identify those providers who are falling short of the expected level of oversight and control over sub-contracting.
It is vital that all lead providers who sub-contract at least £100,000 per annum review the requirements and ensure their organisation has systems and controls in place to meet those requirements. In order for an external auditor to provide the annual assurance report, they will be required to verify the organisation’s arrangements. Where a provider falls short, the auditor will have to report those shortcomings. This could lead to the SFA withholding or withdrawing funding and cancelling funding contracts.